TC BUSINESS Building a
better future for your children
More and
more people are recognizing the importance of giving their children a head start in life
by providing them with a first class education. In an increasingly competitive world, it
is essential that from young age, children get a solid grounding in the basics of reading,
writing and arithmetic, and that as they grow older they achieve the qualifications which
are all-important for further education or the best jobs.
However, providing your children with the best possible education can work out to be very
expensive, with fees often increasing at a rate well above the general level of inflation.
In addition, there are the hidden costs such as uniforms, educational trips and other
"out of school" activities.
The cost of private education in the UK, the US and indeed elsewhere has been increasing
by, on average, 10 percent per annum since the 1980s. The average cost of a UK public
school is approaching EP15,000 per year and the cost of educating one student at Harvard,
MIT or Princeton for one school year is around USD25,000. Your childrens' examination
success may not therefore be cause for unmitigated celebration. In addition, inflation can
also have an effect on your spending power, so you will appreciate that making provision
for future escalating education expenses can be a major headache.
Unless you are in the fortunate position of being able to meet education fees from your
existing capital, you need to plan ahead. The earlier you begin, the more time you will
have to take advantage of compound interest to help you accumulate the required funds to
meet the bills when they start to arrive. Many people are realizing that it is never too
early to set aside a sum of money that will make sure that your children will be able to
choose the best option, regardless of the price.
Whatever your circumstances, these expenses represent a significant financial commitment
and one for which few people plan sufficiently early. Indeed, over 70 percent of parents
(or other family members) finance school fees from current income or short-term savings.
One reason this figure may be so high is undoubtedly the lack of awareness and publicity
of plans geared to meet this cost.
Like all significant periods of expense that can be anticipated in the future, there are
benefits in planning as early as possible. Indeed, some of our clients even begin to save
as soon as their children are born!
A good education fees plan can allow you to meet the costs of education with comparative
ease. Your contributions can be invested automatically and when it comes time to pay the
fees, the plan provider can usually make a direct payment to the school on an annual or
regular basis. It is also possible to have some money to meet living expenses paid
directly to your children while they are studying. By using a suitable trust, you can also
greatly reduce your tax liability as well as ensure that your children will still benefit
from your good intentions and foresight if some misfortune befalls you.
Kenji Steven is a consultant at Stirling Macguire Asset Management
(Japan) Ltd.
More and
more people are recognizing the importance of giving their children a head start in life
by providing them with a first class education. In an increasingly competitive world, it
is essential that from young age, children get a solid grounding in the basics of reading,
writing and arithmetic, and that as they grow older they achieve the qualifications which
are all-important for further education or the best jobs.